Upbeat Small-Business Owners Say Sales Are Picking Up

Small-business owners are feeling more confident about their economic situation, according to a report released Tuesday. An improved trend in sales is pushing small firms to add workers and lift selling prices.

The National Federation of Independent Business‘s small-business optimism index increased to 98.3 in May, from 96.9 in April. Economists surveyed by The Wall Street Journal projected the index to increase but only to 97.3 in May. The report noted the index has moved slightly above the index’s 42-year average of 98.0.

“It appears that the small-business sector has finally attained a normal level of activity, which will hopefully keep the economy moving forward, even at a sub-par pace,” the report said.

The earnings trend index jumped 9 percentage points to minus 7%. “Improved profit trends accounted for over half the index gain, a rather unusual but welcome development,” the report said.

Sales activity increased sharply during the three months ended in May. The net percentage of businesses reporting higher nominal sales in the time period jumped 11 percentage points to 7%. Moreover, small business owners expect the environment to keep improving. The business conditions expectations increased 3 points to minus 3%.

Higher sales are leading small companies to hire new employees. On balance, owners added a net 0.13 workers per firm over the past three months, the NFIB said, the fifth consecutive month of “solid” job increases.

Small-business owners also said they were not done with expanding payrolls. The index covering hiring plans increased 1 point to 12% in May.

Small firms continue to face a tough time finding qualified applicants. In May, 29% of companies had job openings they could not fill right now, the highest reading since April 2006.

A stronger economy is leading more small-business owners to mark up prices. In the three months ended in May, the net percent of owners who raised selling prices stood at 6%, up 4 percentage points from April’s reading.

“If the strength in sales gains persists, owners will have more opportunities to raise prices,” the report added.